Managed Transportation Services (MTS) are being increasingly embraced by shippers, and with good reason: studies have shown that shippers can reduce costs, create visibility and drive efficiencies when they partner with an MTS solutions provider. A 2016 study by ARC Advisory Group indicated that 32 percent of respondents reported savings of 12 percent or more, a dramatic increase over the prior study in which only 9 percent of respondents reported a savings of 12 percent or greater. I would expect that the next survey will demonstrate a further increase in savings for shippers.

While there are many reasons why shippers choose to implement an MTS partnership, I would like to share a few thoughts as to how shippers can partner with their MTS provider to get the most value of the relationship. I have participated in dozens of MTS partnerships representing billions of dollars in funds under management. Throughout those experiences I have seen firsthand that organizations that focus on the “how” as much as the “why” often experience greater success right out of the gate. What are some of the best practices that drive this success?

Ensuring internal alignment and buy-in is absolutely critical to a successful TMS implementation and engagement with an MTS partner. While it is imperative that executives, teams and resources are aligned, it is equally important to ensure that you seek and obtain buy-in from the middle managers and staff that will utilize the TMS each and every day.

A change management plan is a tested and proven vehicle for building alignment and buy-in. As part of your change management plan, consider appointing a project team with clear roles, responsibilities and accountability that can act as the main point of contact with the TMS vendor/MTS provider. The project team should include an executive sponsor, middle managers and TMS end-users, ensuring that a variety of needs and perspectives are represented. The plan must include thorough TMS training for all managers and end-users.

A commitment to clear, concise, and frequent internal communication is an important component of the change management plan. Recent studies have indicated that training, leadership communicating a vision, and ongoing communication updates are cited by supply chain team members as the top three reasons they support and adopt change in the workplace. This goes beyond simply communicating the benefits of a TMS. Leadership must be clear in communicating the goals, priorities and potential obstacles associated with TMS implementation.

Logistics leaders must understand that implementing a TMS is not the end, but rather the beginning, of a process of continuous improvement in your supply chain. For example, because the TMS brings enhanced visibility to your supply chain, you may uncover issues that were previously hidden, including data inaccuracies, varying policies and procedures across locations, etc. While it’s natural to view these challenges as bothersome, it’s important for leaders to embrace and communicate these instances as opportunities for improvement, not obstacles to progress. The TMS becomes the vehicle for both highlighting and addressing these challenges, and yes, it is worth the hassle. For example, TMS implementation can uncover critical and actionable data regarding your organization’s true cost to serve, and can empower you to make adjustments to your pricing that maximize profitability.

Lastly, how you manage your relationship with your MTS partner is also key to success. The single most important factor is communication. Be as transparent as possible regarding your company’s plans for the future, whether that means opening new facilities, rollout of new products, or entering new markets. Be open as well with regards to your shortcomings, including data integrity, resource constraints, or other challenges. After all, you are engaging with an MTS provider and implementing a TMS in order to achieve your organization’s goals; your provider will be better positioned to enable your success if you are clear about where you are headed.

As Senior Vice President of Sales and Solutions at GlobalTranz, Ross Spanier leads the enterprise sales organization as well as the design and delivery of innovative and customized supply chain solutions that drive efficiency, cost savings and competitive advantages for current and prospective customers. With over 15 years of experience in the supply chain and logistics industry, Ross has developed and grown sales and operations teams specializing in best-in-class service execution of LTL, TL, expedite, supply chain management, projects & heavy haul, white glove and managed transportation service lines.

I’m kicking off a new study on Managed Transportation Services (MTS). In an MTS arrangement, a shipper contracts with a third party to plan and execute their moves for them. In other words, instead of having internal planners plan and execute moves, those planners are employed by the MTS supplier, but work on the shipper’s behalf.

Managed transportation arrangements are based upon different operating models. In some cases, the 3PL also acts as a broker and has secured agreement from the shipper to broker some loads into their network. Some 3PLs are also carriers and these managed service arrangements include the understanding that a portion of the loads will be brokered to transportation assets owned by the 3PL. Finally, some managed transportation arrangements are pure outsourced service agreements strictly for planning and execution activities only.

For this study, I am looking at the planning and execution activities where the 3PL serves as an outsourced transportation department for a customer. This study is restricted to revenues generated from control tower environments.  A transportation control tower is a central hub where all the 3PL planners reside, contains a transportation management system, and includes technology capable of providing real-time, multi-party visibility to transportation information.

While the 3PL market has seen some growth slow-downs, the MTS side of the business has been consistently fast-growing. The main driver for this growth has been the strong return on investment (ROI) from an MTS relationship. ARC Advisory Group has conducted multiple surveys that explored the ROI of both TMS and MTS, with the last two surveys taking place in 2014 and 2016. In the 2014 survey, 9 percent of respondents reported more than 12 percent freight savings from their MTS arrangement. However, at that time, 11 percent of respondents reported that the managed transportation arrangement actually increased their freight costs.  In contrast, by 2016, 32 percent of respondents reported savings of 12 percent or more, and only 4 percent of respondents reported that the managed transportation arrangement increased their costs.

The key differentiator here was whether or not the 3PL was using a Transportation Management System (TMS) or Transportation Execution System (TES). Managed transportation arrangements that delivered freight savings of more than 12 percent almost always included a TMS implementation rather than the use of a TES with limited optimization capabilities. In most cases when a TMS was implemented, the shipper allowed the 3PL to use their standard TMS rather than specifying the TMS to be implemented.

Keeping service levels high is also a key component to the MTS model. By that, I mean that no one is going to be happy with lower freight costs if service levels decline. According to our research, 46 percent of respondents reported improvements in service, with just 8 percent reporting that the managed transportation contract reduced their service levels. The remaining 46 percent indicated no change in their service levels.

Historically, other growth drivers for the MTS market have included improved products from the 3PLs, the increasing ability to provide real-time visibility and shipment estimated time of arrival (ETA), new entrants to the market looking to complement existing services, and the overall under-penetration of the market. As I talk to 3PLs during the research process, I’ll be interested to see if these same trends are still driving growth today, what the new growth trends are, and where they see the market going in the next five to ten years. I imagine there is still significant room for growth.